Question
Flexible Budget In an attempt to improve budgeting, the controller for Engersol, Inc., has developed a flexible budget for overhead costs. Engersol, Inc., makes two
Flexible Budget
In an attempt to improve budgeting, the controller for Engersol, Inc., has developed a flexible budget for overhead costs. Engersol, Inc., makes two types of products, commercial floor cleaners and household floor cleaners. The company expects to produce 300,000 units of the commercial cleaner and 140,000 units of the household cleaner during the coming year. The commercial cleaner requires 0.05 direct labor hour per unit, and the household cleaner requires 0.08. The controller has developed the following cost formulas for each of the four overhead items:
Cost Formula | |
Maintenance | $34,300 + $1.25 DLH |
Power | $0.50 DLH |
Indirect labor | $68,500 + $2.30 DLH |
Rent | $31,100 |
Required:
Question Content Area
1. Prepare an overhead budget for the expected activity level for the coming year.
Per DLH | blank | ||
Budgeted direct labor hours | blank | fill in the blank fe998ff72ff8043_1 | blank |
Variable costs: | |||
Maintenance | $fill in the blank fe998ff72ff8043_2 | $fill in the blank fe998ff72ff8043_3 | |
Power | fill in the blank fe998ff72ff8043_4 | fill in the blank fe998ff72ff8043_5 | |
Indirect labor | fill in the blank fe998ff72ff8043_6 | fill in the blank fe998ff72ff8043_7 | |
Total variable costs | $fill in the blank fe998ff72ff8043_8 | ||
Fixed costs: | |||
Maintenance | $fill in the blank fe998ff72ff8043_9 | ||
Indirect labor | fill in the blank fe998ff72ff8043_10 | ||
Rent | fill in the blank fe998ff72ff8043_11 | ||
Total fixed costs | fill in the blank fe998ff72ff8043_12 | ||
Total overhead costs | $fill in the blank fe998ff72ff8043_13 |
Question Content Area
2. Prepare an overhead budget that reflects production that is 10 percent higher than expected (for both products).
Per DLH | blank | blank | |
Budgeted direct labor hours | blank | fill in the blank 8f280cf4f02400d_1 | blank |
Variable costs: | |||
Maintenance | $fill in the blank 8f280cf4f02400d_2 | $fill in the blank 8f280cf4f02400d_3 | |
Power | fill in the blank 8f280cf4f02400d_4 | fill in the blank 8f280cf4f02400d_5 | |
Indirect labor | fill in the blank 8f280cf4f02400d_6 | fill in the blank 8f280cf4f02400d_7 | |
Total variable costs | $fill in the blank 8f280cf4f02400d_8 | ||
Fixed costs: | |||
Maintenance | $fill in the blank 8f280cf4f02400d_9 | ||
Indirect labor | fill in the blank 8f280cf4f02400d_10 | ||
Rent | fill in the blank 8f280cf4f02400d_11 | ||
Total fixed costs | fill in the blank 8f280cf4f02400d_12 | ||
Total overhead costs | $fill in the blank 8f280cf4f02400d_13 |
Question Content Area
Prepare an overhead budget for production that is 20 percent lower than expected.
Per DLH | blank | blank | |
Budgeted direct labor hours | blank | fill in the blank 35f3f6006fdcfe7_1 | blank |
Variable costs: | |||
Maintenance | $fill in the blank 35f3f6006fdcfe7_2 | $fill in the blank 35f3f6006fdcfe7_3 | |
Power | fill in the blank 35f3f6006fdcfe7_4 | fill in the blank 35f3f6006fdcfe7_5 | |
Indirect labor | fill in the blank 35f3f6006fdcfe7_6 | fill in the blank 35f3f6006fdcfe7_7 | |
Total variable costs | $fill in the blank 35f3f6006fdcfe7_8 | ||
Fixed costs: | |||
Maintenance | $fill in the blank 35f3f6006fdcfe7_9 | ||
Indirect labor | fill in the blank 35f3f6006fdcfe7_10 | ||
Rent | fill in the blank 35f3f6006fdcfe7_11 | ||
Total fixed costs | fill in the blank 35f3f6006fdcfe7_12 | ||
Total overhead costs | $fill in the blank 35f3f6006fdcfe7_13 |
Question Content Area
3. Which of the four data analytic typesdescriptive, diagnostic, predictive, or prescriptiveis being used in creating the three flexible budgets? (See Exhibits 2.5 and 2.6, pp. 37, 40, for a review of data analytic types.)
The flexible budgets are used
descriptivelydiagnosticlypredictivelyprescriptively
to determine how well the company will do under various sales scenarios.
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